ON 12 MAY 1983, the High Court of Australia delivered Commercial Bank of Australia Ltd v Amadio  HCA 14; (1983) 151 CLR 447 (12 May 1983).
“Equity – Mortgage and guarantee – Right to set aside – Unusual transactions between bank and customer – Bank’s failure to disclose to mortgagor guarantor – Misrepresentation.
Guarantee – Guarantor under disability – Dealing with bank – Bank knowing of disability – Unconscionable bargain – Onus of proof – Whether transaction should be set aside unconditionally.”
An elderly Italian migrant couple had mortgaged land they owned as a guarantee for a loan from the bank to their son’s business. The business then went into liquidation and the bank demanded payment of the guarantee and then attempted to exercise a power of sale over the land.
The Amadios argued that the guarantee and mortgage should set aside as:
- they spoke limited English;
- they did not receive independent advice and were not advised to do so;
- they were not aware of their son’s financial situation, although the bank was; and
- they mistakenly believed that the liability was limited to $50,000.
The court held that the mortgage and guarantee must be set aside as it was unconscionable for the bank to enter into those transactions in circumstances where the bank through it’s superior bargaining power had gained an unconscientious advantage to the detriment of the Amadios who suffered a special disability.
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